Corporate governance risks and opportunities in CDL’s family feud

COMMON wisdom holds that independent directors in family-controlled listed companies are an essential safeguard against family members on the board and management colluding at the expense of minority shareholders.

The good news for minority shareholders of City Developments Ltd (CDL) is that they don’t have to worry about controlling-family members working in cahoots. The bad news is the newly revealed family feud is still a corporate governance red flag that could hurt the company’s standing in environmental, social and governance (ESG) ratings and indices.

CDL executive chairman Kwek Leng Beng on Wednesday (Feb 26) alleged that Sherman Kwek, his son and CDL chief executive officer, had acted with a group of other CDL directors to make major changes to the company’s board and bypass its nominating committee.

Describing the actions as an “attempted coup”, Kwek Leng Beng has begun legal proceedings “to set things right”. He also intends to remove Sherman Kwek as CEO when “appropriate”, which probably means when possible, since he does not appear to have enough control of the board at the moment to fire his son.

Sherman Kwek described his father’s actions as “incredibly disappointing” and made without the support of the majority of the board.